The Government or a Website: Who has more power over the Venezuelan economy?

CARACAS Venezuela (ViaNews) – The study of the influence of the dollar and its impact on the black market has been a recurring theme over the past 4 years in Venezuela.

The black market exchange rate in Venezuela is set by a web portal called “DolarToday”, which operates from the United States and it defines the country’s exchange rate on a daily basis. It is important to say that the dollar figure is not mathematically established, but responds to a foreign project aimed at setting the exchange rate values from outside of the Venezuelan territory.

The DolarToday team in an interview with the BBC defined itself as “a form of protest against a dictatorial regime increasingly committed to silencing and intimidating the media in Venezuela”.

A controversy has arisen between national and foreign analysts over whether the Venezuelan economy is governed by the State or by the “DolarToday” portal. This controversy questions the government’s feigned economic policy, in turn evidencing the clear flight of capital at the border with Colombia and which has allegedly been induced by private sectors and individuals.

This point is relevant given that the value of the dollar is associated with the prices that traders arbitrarily place at the Colombian-Venezuelan border according to the law of supply and demand. These practices define, almost in its entirety, the price of the dollar, along with variables of lesser weight such as the number of reserves and their measurement according to the gold standard, the exportation of oil, etc…

Quoted price of VEF against the USD (2008-2015). Source: Central Bank of Venezuela

The exchange rate began to grow abruptly from 2013, and no Government economic plan has been successful until today. An increase that has become a daily fact with many of the country’s businessc sectors calculating their costs from that rate. The price of products, daily services and real estate in the country are very volatile and rise as the parallel dollar rate increases. Interestingly, when the parallel dollar falls, the prices of goods, services, and real estate in Venezuela keep getting higher. This shows a total disruption of the national economy in terms of the devaluation of the “Bolívar Fuerte” (national currency, VEF) while the national economy has suffered a brutal inflation since 2013.

Apparently, there are no visible solutions. All consumption by Venezuelans has been dollarized but this is far from being an institutionalized reality because wages and salaries continue to be in VEF.

On the one hand, there is strong corruption and the government’s lack of responsiveness to what they call an “economic war” being waged against the people of Venezuela. The worrying thing is that beyond the existence or absence of an “economic war”, the country suffers from a real and palpable economic crisis with the government refusing to accept its apparently inefficient economic administration.

What about the official dollar?

This is the so-called preferential dollar because its rate is only calculated for imports by government-associated companies. It is even more “fictitious” than the “Dollar Today” itself because the cost is much lower than market prices. It is the State that has been the only one legally responsible for selling foreign currency in the country from the exchange control. However, the creation of CADIVI (old currency allocation system existed in 2013) perverted some practices that were emulated by the population, such as the phenomenon of “coupon scraping” that caused the government to take measures regarding the elimination of the dollar for tourist purposes. Added to this, high levels of corruption proliferated within public companies and entities attached to the State; an issue that has been questioned by government and opposition sectors and has impacted all spheres (economic, social, cultural) of Venezuelan life.

The “coupon scrapers” were those Venezuelans who, between 2013 and 2014, bought the international currencies sold by the State at a preferential price for the purpose of a tourist trip (at a very low price compared to the parallel dollar). These international currencies had a limit imposed by the government, commonly called the “coupons” of dollars for those Venezuelans who wanted to change them. The aim could only be to travel to other countries for tourism. However, it happened that these dollars were sold in Venezuela at the exchange rate established by “Dolar Today”, generating a huge profit of VEF to some people and, in doing so, destabilizing a part of the economy.

It should be noted that these Venezuelan “raspa-cupos” had no political distinction and involved both people identified with the government and the opposition, becoming a non-politicized and individual practice that allegedly sought to obtain the national currency through mechanisms of corruption.

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